Lean Startup by Eric Ries

Lean Startup by Eric Ries

Lessons & Notes:

Build-Measure-Learn feedback loop is at the staple of the Lean Startup philosophy.

The goal of a startup is to get validation as fast as possible.

Never fuss over vanity metrics. Getting lots of followers, likes, website traffic,and page views is great, but none of those pay the bills.

The big question is not Can it be built? But, should it be built?

Any extra work beyond what was required to start executing is a huge waste of time, no matter how significant it might seem.

Failing = Learning

The most important part is to get people to commit and pre-pay as quickly as possible; “cool idea” or “I’d pay for that” doesn’t put a cent in your pocket.

New customers emerge from the actions of past customers.

When creating your own MVP – minimum viable product, make sure to remove any process, feature, or work that does not assist directly with the validated learning you seek.

What does that look like? Noah Kagan from Appsumo also used a simple landing page where people would just send him $60 to get started. For Amazon it was a very basic website. For Zappos, it was a website with just photos with shoes. Only until the customer’s pulled out their credit cards, did the Zappos founder go to a shoe store, buy the actual shoes, and ship them.

Bottom line is validate your idea by having customers pay for the product or service before actually figuring out how you will deliver the product.

Continuously experiment and measure what you’re learning with real users by using cohort analysis and split tests.

You can’t really understand any part of your business until you become a customer of your business yourself and see it from that point of view.

Most problems are caused by bad process, not bad people.

Just in time production method – Toyota has built the most advanced learning model in history. Instead of manufacturing and holding heaps of inventory (vehicles), they keep inventory levels low by only producing the vehicles needed to meet customer demand and keep the production process going.

“If our production process is so fragile that you can break it on your very first day of work, shame on us for making it so easy to do so.”

Your business should have two distinct functions: innovation and execution.

The innovation motto is “Fail fast.” The execution motto: “Failure is not an option.”

The innovation function is about constant testing. The execution function is about the day-to-day operations of your innovation successes.

A true experiment follows the scientific method. It begins with a clear hypothesis that makes predictions about what is supposed to happen. It then tests those predictions empirically. Just as scientific experimentation is informed by theory, startup experimentation is guided by the startup’s vision. The goal of every startup experiment is to discover how to build a sustainable business around that vision.

Successful startups usually focus on just one engine of growth, specializing in everything that is required to make it work. Viral Engine of Growth, Paid Engine of Growth, or Sticky Engine of Growth

The longer we worked, the more afraid we became of how customers would react when they finally saw the new version. As our plans became more ambitious, so too did the number of bugs, conflicts, and problems we had to deal with. Pretty soon we got into a situation in which we could not ship anything. Our launch date seemed to recede into the distance. The more work we got done, the more work we had to do. The lack of ability to ship eventually precipitated a crisis and a change of management, all because of the trap of large batches.

To sell the shoes, Zappos had to interact with customers: taking payment, handling returns, and dealing with customer support. This is decidedly different from market research. If Zappos had relied on existing market research or conducted a survey, it could have asked what customers thought they wanted. By building a product instead, albeit a simple one, the company learned much more:

It had more accurate data about customer demand because it was observing real customer behavior, not asking hypothetical questions.

It put itself in a position to interact with real customers and learn about their needs.

It allowed itself to be surprised when customers behaved in unexpected ways, revealing information Zappos might not have known to ask about.

For example, what if customers returned the shoes?

Split-testing allows the product team to answer these questions rapidly and almost instantly. Segment your customer base and use cohorts to identify the market your testing . Release versions of the products with & without the engine of growth you picked. Validate your engine! Tune it accordingly and when it’s time, rev it up!

“when you fall in love with the problem and not the solution it opens your mind up in a really different way. So we would typically fall in love with the solution, which would always be a product … As you fall in love with the problem, you start seeing business model opportunities; you start seeing marketing and education opportunities in addition to product opportunities, and it’s just much, much richer. we’re spending 25 to 50 percent less money along the journey. It’s amazing.

Most entrepreneurs and product development people dramatically overestimate how many features are needed in an MVP. When in doubt, simplify.

Dropbox: To avoid the risk of waking up after years of development with a product nobody wanted, Drew did something unexpectedly easy: he made a video. The video is banal, a simple three-minute demonstration of the technology as it is meant to work.

Cohort analysis. This is one of the most important tools of startup analytics. Although it sounds complex, it is based on a simple premise. Instead of looking at cumulative totals or gross numbers such as total revenue and total number of customers, one looks at the performance of each group of customers that comes into contact with the product independently. Each group is called a cohort

The sign of a successful pivot: the new experiments you run are overall more productive than the experiments you were running before.

The three A’s of metrics: actionable, accessible, and auditable.

A pivot requires that we keep one foot rooted in what we’ve learned so far, while making a fundamental change in strategy in order to seek even greater validated learning.

The growth hypothesis tests how new customers will discover a product or service.

“Until we could figure out how to sell and make the product, it wasn’t worth spending any engineering time on.”

The point is not to find the average customer but to find early adopters: the customers who feel the need for the product most acutely. Those customers tend to be more forgiving of mistakes and are especially eager to give feedback.

do not hire someone just because they have the domain expertise. You want to be sure that they can work with the resources you can provide in terms of staff size and budgets. In other words, be sure they are ready to work at a startup

question any hiring decision based on “culture fit” alone. While Jeff and Eric agreed that company culture can be powerful and effective, it can also result in a homogeneous company with unexplored opportunities and weaknesses

“Customers don’t care how much time something takes to build. They care only if it serves their needs.”

he decision to pivot or preserve strategy is fundamental to the future of the companies.

The right kind of metrics are unbiased, very specific, small targeted, split tested, cohort analysed metrics.

There are many value-destroying kinds of growth that should be avoided. An example would be a business that grows through continuous fund-raising from investors and lots of paid advertising but does not develop a value-creating product. Such businesses are engaged in what I call success theater, using the appearance of growth to make it seem that they are successful

“When in doubt, simplify.”

Learn -> ideas -> build -> product -> measure -> data -> learn…

Minimize TOTAL time through the loop

VII. Vision triangle

a. Product at top; can be optimized; tuning the engine

b. Strategy in middle; pivot

c. Vision at bottom (foundation); changes less

The strategy may have to change (called a pivot). However, the overarching vision rarely changes.

XII. Concierge MVP: do all the work manually behind the scenes and fake automationa. Actually build real automated product later.

Only meaningful metrics are cohort analyses to see if what you’re building new is actually making any difference

Video MVP: show a video of how product works and fake it behind the scenes

a. See how many people sign up

“You cannot be sure you really understand any part of any business problem unless you go and see for yourself firsthand. It is unacceptable to take anything for granted or to rely on the reports of others.

Leadership requires creating conditions that enable employees to do the kinds of experimentation that entrepreneurship requires.

Success is not delivering a feature; success is learning how to solve the customer’s problem

“entrepreneur” should be considered a job title in all modern companies that depend on innovation for their future growth

“What if we found ourselves building something that nobody wanted? In that case what did it matter if we did it on time and on budget?”

“Ask most entrepreneurs who have decided to pivot and they will tell you that they wish they had made the decision sooner.”

“Product managers figure out what features are likely to please customers; product designers then figure out how those features should look and feel.”

“There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”

“Only 5 percent of entrepreneurship is the big idea, the business model, the whiteboard strategizing, and the splitting up of the spoils. The other 95 percent is the gritty work that is measured by innovation accounting: product prioritization decisions, deciding which customers to target or listen to, and having the courage to subject a grand vision to constant testing and feedback.”

tartups often accidentally build something nobody wants, it doesn’t matter much if they do it on time and on budget. The goal of a startup is to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible.

“True startup productivity is not just making more stuff, but systematically figuring out the right things to build.

“If you don’t know what you’re testing, all the results in the world will tell you nothing.”

“must learn what customers really want, not what they say they want or what we think they should want

“Ask yourself: Do consumers recognize that they have the problem you are trying to solve?”